On April18, 2012, the SEC, jointly with the Commodities Futures Trading Commission (CFTC), implemented part of the Dodd-Frank Act by adding definitions for use in interpreting what are swaps-related transactions.
The new Rule 3a71-1 under the Securities Exchange Act defines the term “security-based swap dealer” consistent with the criteria set forth in the Dodd-Frank Act as someone who:
- Holds themselves out as a dealer in security-based swaps.
- Makes a market in security-based swaps.
- Regularly enters into security-based swaps with counterparties as an ordinary course of business for their own account.
- Engages in activity causing them to be commonly known in the trade as a dealer or market maker in security-based swaps.
There is an exception for those who are only involved in a de minimis quantity of these transactions to not be held to this rule. The rule will go into effect 60 days after the rule is published in the Federal Register.
You can read the entire release and rule through the SEC’s website at: